Ftc And States Unite To Fight Fundraising Fraud

Agreement with Estel Senn
As a part of this campaign, Spitzer announced the resolution of an investigation of Estel Senn, the New York Firefighters Foundation and the New York Police Foundation, two corporations that Senn controlled. These foundations solicited donations from New Yorkers purportedly to be used for college scholarships of family members of police officers and firefighters who were killed or incapacitated in the line of duty. Spitzer alleged that Senn defrauded donors by:

• permitting scholarships to be awarded to students who were not family members of police officers and firefighters who were killed or incapacitated in the line of duty;
  
  
• failing to set up any scholarships in New York City, although at least one of the foundations' fund raisers focused its solicitation efforts on New York City residents and businesses;
  
  
  • implying to donors that donations were tax-deductible when they were not;
    
    
  • paying himself and his relatives excessive compensation; and
    
    
  • failing to make disclosures in the foundations' annual financial reports regarding the Senns' compensation, the relationship of the foundations to other organizations controlled by the Senns, and the identity of the colleges and other organizations to which the foundations made donations.

"Charities that use misleading fundraising tactics are not welcome in New York," Spitzer said. "I urge all New Yorkers to make careful decisions about the charities they support and to contact my office if they believe that have been deceived. By highlighting these issues we can ensure that donors make informed decisions when making charitable contributions."

The settlement permanently bars Estel Senn from conducting any charitable or fundraising activities in New York State. It also requires the foundations to be dissolved. Finally, the agreement requires Senn and his organizations to pay $59,364 to the state. More than $56,000 will be paid to the New York State Higher Education Services Corporation ("HESC") for use in its Memorial Scholarship program. HESC administers scholarships for families of deceased firefighters and police officers who were killed in the line of duty in service to the State of New York.

Pierre Alric, acting president of HESC, said: "HESC is committed to helping New Yorkers avoid scholarship scams. Donors should be cautious when giving to organizations that promise scholarships to the family members of firefighters and police officers killed in the line of duty. Through its Memorial Scholarships Program, HESC currently provides up to $12,000 to qualified recipients in scholarship funds to these students."

Defeat of Motion to Dismiss in All-Pro case
Spitzer also announced that New York State Supreme Court Judge Thomas Keegan had denied motions by Mark Gelvan and his New Jersey telemarketing company, All-Pro Telemarketers Associates Corp., to dismiss a lawsuit brought against them by Spitzer's office. The suit alleges that All-Pro engaged in deceptive practices in connection with solicitations for the Fraternal Order of New York State Troopers, which has since ceased soliciting contributions. In the complaint against All-Pro, Spitzer alleges that starting in August of 1995, All-Pro's solicitors called New York residents, at times pretending to be New York State Troopers, and thus failed to comply with their legal obligation to identify themselves as paid solicitors. The complaint also alleges that donors throughout the state were told that their contributions would:

• be used for drug and alcohol awareness presentations in elementary schools throughout the state, however, between 1995 through 2001, All-Pro staged only 30 anti-drug programs in only nine of New York's sixty-two counties;
  
  
• be used for an "Emergency Fund" to benefit charitable organizations, widows and orphans of the Fraternal Order's members, and State Troopers while no such "Emergency Fund" existed.
  In the lawsuit, Spitzer is seeking restitution of funds contributed by New Yorkers and to ban Gelvan and All-Pro from engaging in any further fundraising in the State of New York.

TIPS FOR CHARITABLE GIVING
Spitzer today joined the FTC and 33 states in a coordinated education campaign to promote wise giving choices by consumers. Charitable donors are particularly vulnerable to fraudulent misrepresentations by professional fundraisers because, in contrast to a purchase of a product or an investment, donors do not receive anything in exchange for their donations. Thus it is harder for donors to verify the truthfulness of a particular solicitation based solely on what is said over the phone or in the direct mail appeal.

The Attorney General advised donors to consider the following tips when deciding whether to make a contribution:

Mandatory Disclosures
All telemarketers who raise money for charity are required by law to state their names, the name of their company and that they are being paid to make the phone call. If no such disclosures are made, donors should ask the caller if he or she is a volunteer or a paid telemarketer.

The Attorney General is often asked why fund raisers are not also required to disclose the percent of funds that will be retained by them and the amount that will be used by the charity for its charitable activities. A series of United States Supreme Court decisions have held that such a requirement would be an unconstitutional restriction on the charity's First Amendment rights to freedom of speech. Therefore, donors must ask for such information before deciding whether to make a contribution. A copy of the charity's contract with the fund raiser can also be obtained by contacting the Attorney General's office at the address and phone numbers below.

Charitable Programs
Telemarketers are required by law to give a clear description of the use to which any donated funds will be put. Contributors should be wary of appeals that do not state how contributions will be spent.

Written Materials
Donors do not have to agree to donate at the time they receive a telephone call. Donors can and should request printed material that provides the charity's address and phone number and describes the charity's program and how it uses its money.

Local Benefit
Many people want to show their support for public safety organizations by giving to their local police departments or firehouses. Be wary of telemarketers who claim to be police officers or firefighters themselves or who promise you that your contribution will entitle you to police protection or privileges.

This is illegal. When asked to give to a public safety organization, contact your local police or appropriate law enforcement agency to verify the legitimacy of the soliciting organization.

Tax Deductibility
Not all contributions are tax deductible, even if the organization uses the words nonprofit or foundation. In general, donations are tax deductible only if they are given to organizations that have been given federal tax-exempt status pursuant to section 501(c)(3) of the Internal Revenue Code. To be sure that your donation is tax deductible, check the name of the organization on the Internal Revenue Internet site www.ustreas.gov or call 1-877-829-5500 or ask the fund raiser to mail you a copy of the Internal Revenue Service determination letter with the charity's written material.

Public Information
To obtain a copy of a charity's annual financial report, contact the Attorney General's office at (212) 416-8400 or toll free at 1-800-771-7755.

The following resources are available at any of the Attorney General's sixteen offices and on the web at www.ag.ny.gov:

Tips on Charitable Giving
Pennies for Charity
Tips for Charities Raising Funds in New York State

If donors suspect that they have been victims of charitable solicitation fraud, they should contact the Attorney General's Office at 1-800-771-7755.